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Do You Need Car Insurance?

Fran
Ashley Chorpenning May 11, 2021

New Hampshire is an often-overlooked gem. Driving through it comes with towering mountains and teeming rivers. It seems to have everything for the average car owner – except mandated auto insurance. Most U.S. states require proof of insurance for drivers to operate a car. However, each state comes with its own set of rules. And while it may sound nice not to spend money on policy premiums like some in New Hampshire, auto insurance can safeguard you, your car and those you meet along the road.

If you're a U.S. citizen, the chances are that you live in a state that requires car insurance. It's in your best interest to purchase more coverage—that is, if you can afford it. The minimum auto insurance requirements may not fully protect you, your family members, and the assets you've worked hard to accumulate from financial loss. Going without adequate auto insurance leaves you financially responsible for any damage caused.  In this article, we will break down the importance of coverage.

Why Having Car Insurance Is Important

While it's important to listen to state laws, there are other reasons you should purchase car insurance. You might not always think of these factors when buying a policy, but they can make all the difference.. Take into account the ways car insurance provides for you, such as:

  • Protection Comes First: With the right car insurance on your side, you can protect yourself, your passengers and others on the road. Car insurance ensures that you're covered if an accident occurs, which could lead to property damage or bodily injury. Buying a policy means that you can pay for those expenses, whether you end up with a totaled car or your family member riding shotgun sustains an injury.

  • Paying Turns Into Savings: Once you experience a collision (or another covered event under your policy), you realize how much car accidents cost. The amount of money you put into your policy is a fraction of what you will spend on your car, as well as possible medical or legal fees, without it. So, by buying car insurance with varying coverage, such as comprehensive or property liability, you can avoid hefty future expenses.

  • Save on More than Money: You spend more than just money after a car accident – you spend your time. Taking on a car insurance policy allows you to bypass particular hassles and leave them in the hands of your auto insurance company. Therefore, you don't have to handle negotiations or accommodations after an auto accident. A good insurance company will help you cover post-collision costs, like towing or repairs and navigate the claim process. Thus, saving you energy by taking stressors off your shoulders.

  • Supports Your Health Insurance: There may be gaps in your health insurance plan. Your insurance can help pay for medical expenses that may close the coverage gap. The right auto policy can help you pay for medical care following an accident that health insurance may not cover.

  • Peace and Comfort: Accidents are stressful, regardless of whether you are at-fault or not. Car insurance provide an emotional cushion. It ensures you're financially taken care of, even if an uninsured driver hits you, and gives you direction after an incident.

Do You Have To Have Car Insurance?

There is no one-size-fits-all across the country, however. There is a range of protections that may or may not be required by the state where you reside. According to the Insurance Information Institute, the range of compulsory coverages includes:

  • Bodily Injury Liability
  • Property Damage Liability
  • Uninsured Motorist
  • MedPay (or first party medical expenses)
  • Underinsured Motorist
  • Personal Injury Protection or PIP(Mandatory in no-fault states)
  • Financial Responsibility

You can research proof of insurance requirements and information via insurance companies or your state insurance department.

Even though you may want to purchase the minimum auto coverage amounts, there are a few types of coverage that are worth increasing.

Do I Need Liability Insurance?

Most states require liability protection. For example, California requires drivers to carry at least $15,000 liability coverage per person and $30,000 per accident, and $5,000 of property damage liability coverage. That way, if you're responsible – or liable, in other words – for an accident, liability will help cover the other individual's expenses resulting from liability claims. This is typically broken up into bodily injury liability and property damage liability.

Bodily injury liability coverage (BI) accommodates medical bills. If you hurt a person in an accident, this policy will help pay for their medical expenses. In contrast, property damage liability coverage (PD) helps you pay for any repairs to another person's possession, such as their car. With these, you don't have to use money directly from your own resources.

Depending on your policy, you'll have caps on what your insurer will pay out per accident. The average liability claim in 2019 was $18,417, while the property damage claim was $4,525, according to ISO®, a Verisk Analytics® business. Meaning if you didn't have sufficient insurance, you would be on the hook for this cost.

Do I Need Personal Injury Protection? 

Personal injury protection, or PIP coverage, protects you and your passengers if you're injured during a car accident. It generally covers medical bills and can also pay for other expenses, like lost wages, child care, and funeral fees.

Certain states require car owners to purchase PIP coverage if they are in a "no-fault" state. Essentially, these states ensure that their drivers have coverage for their injuries and damages, regardless of who is at fault. So, these vehicle owners have to file a claim with their respective insurance companies, no matter what. Other states offer PIP as optional coverage.

Do I Need Uninsured Motorist Coverage?

There are two types of coverage to look out for if you want to protect yourself against drivers without the proper liability protection: uninsured motorist (UM) and underinsured motorist (UIM). Several states require you to carry uninsured motorists at the minimum, although some may want both.

When you have uninsured motorist insurance, you're protected when a driver without liability insurance causes an accident. In some situations, a driver may even leave the scene of the accident without exchanging information. This type of policy can help you in such situations.

On the other hand, a driver may have liability insurance, but it's not enough to cover the extent of costs. They will likely pay up to their auto insurance policy limits, but that will still leave leftover fees. The underinsured motorist insurance helps cover those residual expenses according to the limit you choose.

In some states, these coverages are bundled and required for each vehicle owner. Other states only demand you purchase one, such as Missouri or Wisconsin.

Do I Need Collision and Comprehensive Coverage?

Individuals who lease or finance their vehicle need collision and comprehensive coverage. That is because the lender or car company wants to protect their financial interest in your vehicle. According to Insurance Information Institute, the requirements depends on the leasing company.

Although states don't require these specific policies, both coverages not only benefit your lender, they benefit you as well. Each coverage will help you repair or replace your car if it's damaged under an event covered by your coverage.

Collision Insurance

Collision insurance takes effect in the event of a car accident. It helps pay for any damages to your car following a collision. Even if you are the one who is at fault, the collision coverage will still kick in and cover repair costs.

Comprehensive Insurance

Collision coverage pays for collision-based damages; comprehensive coverage helps you when a wide range of events damage your car. Depending on the insurance provider, comprehensive insurance can protect you when natural disasters hit; a thief vandalizes your vehicle, fires ravage, and more.

Do I Need Medical Payment Coverage?

Depending on where you live, you may need to purchase medical payment coverage or "MedPay" from your insurance company. Similar to PIP, it helps you pay for medical expenses you or your passengers sustain. The good news is that it kicks in regardless of who caused the accident. It typically helps pay for costs like doctor visits, an ambulance, and other associated fees.

However, it's an optional policy and is not available in every state. Be sure to check with any company you want to purchase a policy from for their offers. While you may not be able to get MedPay, other offered coverages compensate for medical costs.

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What Other Car Insurance Coverage Do I Need?

The above coverages create a solid spread for a car insurance policy. But, every individual has unique needs. You may find there are still some coverage gaps in your policy. If so, there are a few options to consider.

Gap Coverage

One policy add-on that you may find helpful is gap coverage. Gap insurance works for those who are still paying off a loan or lease on the car. If you total your vehicle under a covered event, gap coverage kicks in and covers the difference between the remaining balance on the loan and the car's actual cash value (ACV).

Roadside Assistance

A car accident isn't the only concern of car owners, though. Roadside assistance insurance ensures that you're not stranded if your car breaks down or you lock yourself out. With this, you have access to services like a tow truck and locksmith. Plus, if you find out that the car will need to go into the shop for a while, rental reimbursement insurance may come in handy. It provides you with a rental car or compensation for public transportation while your vehicle is under repair.

What State Allows You to Drive Without Insurance (Hint: New York State Isn't It)?

If you live in a state that does not require auto insurance, then you can drive without it. The only two states where this applies are Virginia and New Hampshire. However, it is not as simple as it sounds.

According to the Virginia Department of Motor Vehicles, Virginia Code 42.2-706 still requires in-state registered vehicles to have financial responsibility if they're at fault for another's injury, death, or property damage. The state offers three avenues to meet this requirement: obtaining minimum liability coverage, prove you have a Surety Bond or self-insurance certificate, or paying the Uninsured Motor Vehicle (UMV) fee of $500 at registration. Even with the fee, you still are liable for any damages following an accident.

Similarly, while New Hampshire drivers don't need car insurance, they're still responsible for damages. The State of New Hampshire Insurance Department's guide reminds car owners that auto accidents can lead to high medical, property, and legal costs, regardless of whether you are at fault. Suppose you buy auto insurance coverage in New Hampshire. In that case, liability insurance limits are 25/50/25, or $25,000 per person for bodily injury, up to $50,000 if two or more persons are hurt, and up to $25,000 for property damage.

How To Access to Cheap Car Insurance

Finding affordable car insurance can feel daunting. That doesn't mean it's impossible, though. You just need to know how to navigate the market and keep some tips in mind.

  • Purchase Sufficient Insurance: While lower prices can be tempting, minimal car insurance can leave you vulnerable. If you're at-fault for an accident, the cost of damages could surpass your policy limit. Thus, you're left to pay for the rest on your own.
  • Know Your History: Varying personal factors can raise your insurance premium. Before you go shopping for a policy, take inventory of those traits. They can include the type of vehicle you drive, your motor vehicle report, and your credit score.
  • Search for Discounts: Some insurance companies offer an array of discounts that you can take advantage of. From bundling policies to organization memberships, there are numerous options to explore that can help you cut down on costs.
  • Keep Your Coverage: It's possible to drop your collision and comprehensive coverage after you pay off your car insurance loan. While that can lower immediate costs, it can hurt you in the future when you have to file a claim. Remember: you save more long-term by paying certain expenses now.

Most of all, though, you want to shop around for the most competitive rate for your situation. Comparison shopping can save you money and find you the best bang for your buck. Online comparison tools like SmartFinancial can make the search easy – plus, it's free! Just a few clicks and you have quotes from local agents throughout your area at your fingertips. You can begin by entering your zip code below or by calling 855-214-2291.

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